Adams Accounting Blog

Murray Goulburn Share Restructure Progress

What’s happened so far?
On the 29th May 2015 MG announced its Initial Public Offer (IPO) price range which is $2.10 to $3.20 per unit in the MG Unit Trust.
MG will announce its final IPO price in late June and it will be somewhere in the range indicated above.

Under the existing share structure all shares are valued at $1.

The restructure is based around two principals
1/ The companies shareholders that can vote remain in the dairy farmers hands.
2/ The remaining shareholders are entitled to the same rights as dairy farmer shareholders except they cannot vote.

Dairy farmer shareholders are able to sell shares in the company but this is in a staged process over three years after the float.

What might happen to the share price in the future?
This is the 69 dollar question.
Public company share prices live or die based on the meeting of financial targets.
If in the first six to twelve months the company achieves it profit targets the share price will hold firm.
If in the first six to twelve months the company does not achieve its profit targets the share price will get hammered down and it will take a few years for it to recover, provided targets are then met in future years.
If in the first six to twelve months the company achieves higher than targeted profits the share price is likely to rise.

So getting the company affectively floated on a market (which the board has achieved) is step one.
Hitting financial targets (under public scrutiny) in the first twelve months is step 2.
Maintaining that momentum in the loger term is the huge step 3.

Now if all that can go to plan the shares will perform well. But as with all new entrants to the market there will be some rough times and with competition out there for milk fairly robust MG has a huge job ahead if it to lack in the share value of say $3 plus.

If the company can achieve this type of price over say the first two years there will be some very happy older farmers out there who have seen their share price go from $1 to $3 and yes when they sell they will have created a Capital Gain of which the ATO will want a slice.

Adams Accounting can help you plan for this gain and suggest options to minimise the tax bite.